FT News Briefing What does China ‘de-risking’ actually mean?
4 snips
Sep 28, 2023 Western companies are grappling with a decade-low in global dealmaking amid geopolitical tensions. They are adopting 'de-risking' strategies, such as divesting and localizing, to navigate economic ties with China. Meanwhile, Chinese battery manufacturers are eyeing Morocco for investments, notably a $2 billion plant for electric vehicle battery materials. This shift could reshape supply chains and resource investments, particularly in phosphate, as companies strive to adapt to new market dynamics.
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Dealmaking Downturn
- Mergers and acquisitions are experiencing their worst third quarter in over a decade.
- This downturn is largely attributed to rising interest rates, increasing borrowing costs, and stricter regulatory environments.
M&A Bright Spots
- Cisco's acquisition of Splunk and the merger of Westrock and Smurfit Kappa represent positive developments.
- These deals demonstrate that large-scale M&A activity persists despite the overall downturn.
De-risking from China
- Western companies are de-risking from China due to strained US-China relations.
- This involves diversifying supply chains and localizing operations within China.